Umbrella Insurance Explained: Extra Liability Coverage in Plain Words
Umbrella insurance is extra liability coverage that may apply after the liability limits on your home, auto or similar policy are used up. It is not a replacement for those policies. The details differ by insurer and state, so this guide covers the basics and the questions to ask.
What umbrella insurance is
An umbrella policy is a separate policy that adds liability protection above the limits of your underlying policies, such as home and auto. If a covered claim is larger than the limit on your auto or home policy, the umbrella may pay part of the remaining amount, up to its own limit.
How it works with your other policies
Most insurers require you to keep certain minimum liability limits on your underlying policies before they will offer an umbrella. The underlying policy pays first. The umbrella may only apply after those limits are exhausted, and it follows its own terms and exclusions.
What it usually covers
- Liability for injuries to other people that you are legally responsible for
- Liability for damage to other people's property
- Certain legal defense costs, depending on the policy
- Some claims that standard policies may not include, depending on the insurer
What it usually does not cover
- Damage to your own home, car or belongings
- Intentional acts
- Business activities, unless a policy says otherwise
- Anything specifically excluded in the policy wording
Questions to ask an agent
- What underlying limits do I need to keep?
- How much coverage is offered, and in what amounts?
- What is excluded?
- Does the policy cover everyone in my household?
- Does it apply to rental properties, boats or other vehicles I own?
- How is the premium set, and can it change at renewal?
Is it right for you?
Whether an umbrella makes sense depends on your assets, your risks and what your current policies already provide. There is no single answer. Compare the cost with the added protection and read the exclusions before deciding.
Next step
A licensed agent can explain how an umbrella would fit with your current home and auto policies. HavenLine is a referral service, not an insurance company.
Questions
Is umbrella insurance required?
No. It is optional, although an insurer may ask for it in some situations.
Does an umbrella replace my auto or home policy?
No. It sits on top of them and does not replace them.
Can I buy an umbrella without home or auto insurance?
Usually insurers expect certain underlying policies. Ask the insurer for its rules.
General information only, not financial, legal or insurance advice. Rules, prices and benefits vary by state and by policy. A licensed professional can explain what applies to you.